Since iOS 5, Personal Hotspots have made it pretty easy and simple to connect your laptop, iPad, other smartphones and devices to the internet via the iPhone. You no longer have to tether things and set up some software to get it done.
Depending on your carrier, the Personal Hotspot feature comes enabled (or you might have to enable it). Personal Hotspots on the iPhone are what turn your iPhone into a modem. Of course, there are variations though.
Interestingly though, a lot of people do keep asking how to use the iPhone as a modem. If you're looking for that information, we've got it here.
The iPhone As a Modem:
You can use the iPhone as a modem for your laptop/desktop by connecting it to the system.
Step 1: Go to Settings -> Personal Hotspot
If Personal Hotspot isn't visible or if it's not activated, you might have to call up your carrier (AT&T, Verizon etc.) and ask them to enable the service for your number. Usually it comes enabled by default.
Step 2: Turn this feature ON
Your iPhone becomes an active hotspot only when you turn ON personal hotspot. This applies even when you're connecting it “wired.”
Step 3: Now connect your iPhone to your computer via the USB cable.
Step 4: Forget iTunes. That's not what we're after so if it opens up, ignore it or close it down.
Step 5: Under your network settings (accessible from the task bar), you should now see your iPhone listed as a network device. Click on it.
Step 6: Once connected, you should now be able to access the 3G connectivity via your iPhone. It begins to work as a modem.
This is a particularly simple method. Of course, if you wanted to use it as a Wi-fi modem, you'll simply turn on the Wi-fi receivers in your laptop and then search for your device.
For Wi-fi, your iPhone will be listed as a network device again. This time though, you'll have to supply the password. You can find this password (and edit it, if needed) under Settings -> Personal Hotspot.
Below is a video tutorial teaching how to turn on personal hotspot on iPhone: